China’s underperforming tech stocks are sending a warning its export data keeps drowning out. The country builds the best electric cars, solar panels and AI models on the planet, but the benchmark CSI 300 (an index of the 300 largest companies listed in Shanghai and Shenzhen) still trades below where it sat in February 2021, while the S&P 500 has gained more than 90 percent over the same stretch.
Donald Low, a public policy professor at the Hong Kong University of Science and Technology (HKUST), argues the gap points to one stubborn failure. China can make almost anything cheaper than its rivals. It has not been able to make its own households want to buy it all. The market has been saying as much for five years, and the latest spending numbers say it again.
A Five-Year Gap Between Wall Street and Shanghai
Start with the scoreboard, because it is brutal. From its February 2021 peak, the CSI 300 was down by roughly 15 percent as of the end of May. Over the same window the S&P 500 climbed more than 90 percent and Japan’s Nikkei index rose about 120 percent. An investor who bet on Chinese blue chips at the start of the decade has gone backwards while almost every other major market raced ahead.
The damage is worse among the tech names that are supposed to carry China’s future. The tech-heavy Nasdaq Composite nearly doubled over five years. The Hang Seng TECH index, which tracks the 30 largest technology firms listed in Hong Kong, fell by close to 40 percent. Chinese investors also took on more risk to get those losses, because mainland shares swing harder than developed-market peers.
| Index | What it tracks | Move over roughly five years |
|---|---|---|
| CSI 300 | Largest Shanghai and Shenzhen stocks | Down about 15% (from Feb 2021 peak) |
| Hang Seng TECH | 30 largest Hong Kong tech firms | Down about 40% |
| S&P 500 | Large-cap US stocks | Up more than 90% |
| Nasdaq Composite | US tech-weighted index | Nearly doubled |
| Nikkei 225 | Large-cap Japanese stocks | Up about 120% |
You can see the puzzle. The headlines say China is winning the industries of the future. The share prices of the companies building that future say something colder. A market that doubts the listed champions of electric vehicles, batteries and artificial intelligence is doubting the demand those champions are counting on.
Where Household Wealth Went
Part of the slump is self-inflicted. Beijing chose policies that hollowed out the value of its own consumer giants, and the confidence those moves drained has not come back.
The Crackdown That Still Echoes
At the height of the pandemic, regulators came down hard on consumer tech leaders including Alibaba and Tencent, citing data privacy, financial stability and monopoly power as Big Tech pushed into consumer finance. Underneath the stated reasons sat a preference. China’s engineer-planners wanted to pour capital and talent into upstream “hard tech” such as semiconductors and AI, and they viewed consumer platforms as a lower priority diverting resources from strategic goals. The formal crackdown ended years ago. The chill on investor and consumer sentiment did not.
A Trillion Dollars Heading Out
Money has voted with its feet. An estimated US$1 trillion of so-called hot money left China in 2025, by a Bloomberg Intelligence measure the largest annual outflow since the data began in 2006, much of it chasing better returns abroad. The response was control, not reform. On May 22 financial regulators opened a crackdown on offshore trading platforms accused of helping investors slip past capital controls, with the securities regulator targeting brokers including Futu, Tiger and Longbridge. Capital that wants out is a verdict on the assets it is leaving.
Property and the Reluctant Shopper
Then there is the house. After authorities tightened controls on property developers in 2021, home prices fell across five years, and for most Chinese families the home is the bulk of their net worth. The hit to wealth shows up directly at the till. Retail sales grew just 0.2 percent in April from a year earlier, the weakest reading since December 2022, when the country was crawling out of zero-COVID. Auto and home-appliance sales both fell more than 15 percent. Banks are now absorbing the strain from underwater mortgages, a slow-burn problem detailed in China’s deepening mortgage crisis and lender response. A household that feels poorer does not splurge, no matter how often the state names consumption its next engine of growth.
Overcapacity Turns Into a Price War
The demand gap meets a supply glut, and the result is ugly. Overcapacity now scars both old industries like steel, property and consumer electronics and the new ones China bet its future on, electric cars and solar panels among them.
Local governments showered the new sectors with subsidies, cheap land and interest-free loans. Factories went up fast. But the cheap EVs and solar modules they spat out ran straight into protectionist tariffs across developed markets, which capped the export demand the model assumed. What followed at home was a brutal price war.
- More than 40 Chinese solar firms have gone bankrupt, been acquired or delisted since 2024
- US$60 billion in industry-wide losses booked by China’s solar sector last year
- 15.3 percent drop in April auto sales from a year earlier, a sign price wars are not clearing the glut
All of it feeds deflation. Consumer prices stagnated from early 2023, and the producer price index (PPI, a gauge of factory-gate prices) sat firmly negative for years. It snapped that streak in April only because of a war-driven commodity shock after the United States’ conflict with Iran, not because Chinese shoppers came back. Deflation feeds on itself. Households wait for cheaper goods, firms delay investment, demand falls further, wages stay flat, and the expectation of falling prices digs in deeper.
Technology Without the Productivity Payoff
Here is where the official story struggles most. With the state pushing “new productive forces” and large language models (LLMs, the AI systems behind chatbots) that rival Western ones, you would expect productivity to be surging. It is not. China’s total factor productivity (TFP, a measure of how efficiently an economy turns capital and labour into output) has slowed hard, from around 4 percent growth in the first two decades of reform to under 2 percent over the past decade. For a middle-income country, that is ordinary.
Several forces drag on it:
- An ageing workforce that shrinks the labour supply
- A slowdown in key export markets after the 2008 global financial crisis
- Weak consumption growth that starves the domestic market
Authorities have tried to steer the economy out of low-productivity property and traditional infrastructure, yet those sectors still dwarf the new ones. Strong corporate results from hard-tech firms, such as the gains reported across China’s A-share hard-tech earnings for 2025, are real but not large enough to offset shrinking legacy industries. With overcapacity already weighing on prices, there is little room for the new champions to grab a much bigger share of the economy in the next few years.
Can Beijing Build the Demand It Keeps Promising?
The fix is no mystery. Economists have spent more than a decade calling for the moves that would lift consumption for good rather than for a quarter or two: bigger social spending in the countryside and reform of the hukou system, the household-registration rules that block rural migrants from full access to urban schools, healthcare and pensions. Those reforms still have not arrived.
Instead, policy keeps reaching for the supply side. The latest example is a plan to channel fresh capital into lenders, covered in Beijing’s US$44 billion state-bank injection to fund technology, money aimed at production and strategic sectors rather than at household wallets. In an economy China’s size, more supply cannot paper over weak demand.
China has shown that it can create globally competitive productive capacity, but it has not been able to create a matching appetite for what it produces. That remains its biggest economic challenge.
That is Donald Low, writing in his CNA commentary and drawing on his book on China’s pandemic-era policy missteps, The Price of Zero and its account of the crackdowns. His diagnosis lines up with the broader case for rebalancing toward households that institutions like the World Bank’s China economic overview have pressed for years.
The stock market is the cleanest read on all of this, because it prices the future rather than the press release. You can confirm the spending weakness yourself in the monthly China retail sales year-on-year data series, and the index slide in the live CSI 300 historical price chart. Until rural social spending and hukou reform actually land, every fresh round of supply-side support keeps running into the same wall: a household sector that will not, or cannot, spend.
